In Conversation with Gabriel Zucman — Heather Boushey with Gabriel Zucman

In this installment, Equitable Growth Executive Director Heather Boushey talks with Gabriel Zucman, professor in the Economics Department at the University of California, Berkeley. His research focuses on global wealth, inequality, and tax havens. Zucman also is co-director of the World Inequality Database, a database aiming at the provision of access to extensive data series on the world distribution of income and wealth.

In an in-depth conversation about his research and its implications for public policymaking, Boushey and Zucman discuss:

• The creation of distributional national accounts
• The importance of distributional national accounts
• The significance of rising income inequality in the United States
• How income inequality in the United States compares to other countries
• What new research needs to be done on measuring economic inequality…

Zucman: There are two different conversations going on today. One is about macroeconomic growth, which relies on national accounts data: macroeconomic statistics of [Gross Domestic Product] growth, investment, consumption, etc. This is what macroeconomists talk about. Then you have a second conversation, which is about inequality. In academia, when scholars study inequality, they use tax data and survey data. The problem is that there is a big disconnect between what you see in tax and survey data and what you see in the national accounts data. As a result, there is a disconnect between these two conversations.

Generally, we either talk about growth or about inequality, but rarely about the two together. The distributional national accounts we’re constructing are an attempt at bridging the gap between macroeconomics, on the one hand, and inequality studies on the other hand. The way we try to do that is by distributing the totality of national income—a comprehensive measure of income that is very close to GDP. To have a comprehensive view of how all of GDP (or all of national income) is distributed in the United States, we combine survey data and tax data in a systematic way....

Of course, it’s not possible for incomes to grow for each group of the population more than GDP. Yet oftentimes, you see reports where that is being shown. Our goal in this project is to make sure that things add up—that income growth across the income pyramid adds up to national income growth. That’s the main goal, and it’s important because it yields new insights about what’s happening to inequality in the United States....

WCEG — The Equitablog
In Conversation with Gabriel Zucman
Heather Boushey with Gabriel Zucman

See also at WCEG
Kaldor and Piketty’s facts: The rise of monopoly power in the United States

Gauti Eggertsson, Professor of Economics, Brown University; Jacob A. Robbins, Ph.D. Candidate, Brown University, and Ella Getz Wold, Ph.D. Candidate, Brown University

Steve Roth — How Do Americans Get Rich? (And Stay Rich?)

Wealth is generally conceived as a stock that is increased by the flow of income. But some wealth grows by itself, for example, equity prices based on market cap and real estate based on land rent. While interest is considered a type of income and is booked periodically (and is taxable in the period), asset appreciation that increases wealth is not considered income but capital gains and it is not booked (or taxed) until it is realized  even though it results in actual wealth accrual. Steve Roth poses some questions about this.

A huge aid to answering that question arrived last month. Gabriel Zucman, Emmanuel Saez, and Thomas Piketty (PSZ) released one of the most important pieces of economic research in the last century. Their Distributional National Accounts (DINAs) reveal the distribution of national income to different income classes, wealth classes, age groups, and genders (and potentially different races, etc. etc.). This has been unavailable in the national accounts, and as a result it’s absent in most macroeconomic empirical work.…

But impressive as they are, the DINAs don’t fully answer the question of how Americans accumulate wealth. Because the DINAs only tally income, and income doesn’t include households’ holding (or “capital”) gains on stock portfolios, real estate, etc. Income does include much “property income” — dividends, interest, etc. That’s income from owning things. But it’s not everything that households receive from ownership. Holding gains figure large in that picture.

Any investor will tell you: cap gains are a big part of their wealth accumulation. Total return — dividends plus capital gains — is the measure that most savvy stock-market investors care about, long-term (and that fund managers like to tout, loudly). And much of Americans’ retirement saving — especially middle-class Americans — is accrued through capital gains on their homes.

The DINAs’ central goal is to match income as presented in the national accounts, and to reveal a multidimensional pyramid of distributional data underneath that income measure. A deeply worthy goal. But as a result, the DINAs can’t and don’t reveal the whole picture of household wealth accumulation (change in assets and net worth), or its distribution.…

Wealth accumulation greatly exceeds saving from income, pretty much always and everywhere, over very long periods. And holding gains are not a small part of wealth accumulation, especially for already-wealthy households....

Evonomics
How Do Americans Get Rich? (And Stay Rich?)

Steve Roth | Publisher of EvonomicsSae